Legal Challenge Before Court to Test ‘Sharefarming’ Concept

At S. G. Borello & Sons Inc., a family operated fruit and vegetable farm near Gilroy, the landowners planted, cultivated, sprayed and fertilized the cucumber crop in the summer of 1985.

Then a few weeks before harvest, a dozen farm worker families came on under contract to take over the weeding, irrigating and picking of the cucumbers, ultimately splitting the profits from crop sales 50-50 with the owners.

In California agriculture the arrangement is called “sharefarming”--and currently about 20,000 workers engage in it in some form, exchanging their labor for part of the proceeds, rather than an hourly wage.

But state labor officials decided to challenge the operation at Borello--and the action sparked a hard-fought legal test that is set for argument before the California Supreme Court Tuesday in Sacramento. The outcome could affect a wide range of state laws designed to protect workers, lawyers say.

At issue is whether the sharefarmers at Borello under the law are “independent contractors,” as the grower claimed, or are “employees,” as the state claimed. If they are contractors, Borello would be freed from providing workers compensation insurance and other state-mandated protections. If they are employees, the grower would be required to meet such obligations as an employer.

Issue in Appeal Action

A state Court of Appeal in San Jose ruled last December that because Borello did not retain control over the care and harvest of the cucumbers, the workers must be regarded as contractors.

State officials, backed by legal aid lawyers, contend that the sharefarming agreement is a subterfuge to enable the owners to avoid labor laws and that the appeal court ruling could have a drastic impact on the employer-employee relationship throughout California.

If the decision stands, say these officials and lawyers, employers in farming as well as other industries could sidestep a broad range of wage and hour, health and safety and other protective legislation by converting “employees” into “contractors.”

Sharefarming agreements such as Borello’s also could impede union organization efforts, allow growers to evade anti-discrimination laws and invite the hiring of illegal aliens under the guise of contractors, they assert.

“If Borello wins it will be devastating to farm workers and also could have really bad implications for other industries,” said William G. Hoerger, an attorney for California Rural Legal Assistance in San Francisco.

Lawyers for Borello, supported by farm and grower organizations, contend the workers perform independently of the landowner and that the Court of Appeal was correct in finding that they were contractors.

The attorneys defend sharefarming as both economically efficient and mutually beneficial for the landholders and workers.

Cost Factors Cited

Farm owners are freed from hiring labor supervisors and the costs and paper work imposed by labor laws, they say. Meanwhile workers can set their own hours--allowing them to hold other jobs or attend school--and make their own crop-care and harvesting decisions. The workers, they contend, can earn substantially more as contractors, making up to five times the minimum wage of $4.25 an hour.

“There are better results for both the grower and the sharefarmer,” says Marcus Max Gunkel of San Jose, an attorney for Borello. “The state wants to outlaw sharefarming. . . . But the growers like it because the workers will look more closely after a crop in their own interest--and the workers like it because it puts more money in their pockets.”

The growers argue that if the justices overturn the appeal court ruling, and thus force owners to treat sharefarmers as employees, it will impose costly hardships on small farmers in particular.

“This outcome in this case will be extremely significant,” says Carl G. Borden, associate counsel for the California Farm Bureau Federation in Sacramento. “If the court rules the workers are employees, some growers may just chuck it and go out of business. Working under those requirements, having to hire supervisors to oversee the work, handling the payroll and accounting and paper work, may all prove more than they can handle.”

Skill in Handling

Sharefarming is being employed primarily in the harvest of cucumbers, cabbage, peppers, strawberries, peas and other crops whose handling requires certain skills, attorneys in the case say.

Although the terms are sometimes used interchangeably, sharefarmers are seen as different from sharecroppers, who operate a farm as tenants in return for a share of profits. Also, authorities note, in California the term sharecropper is disfavored because of its association with poverty and discrimination in the rural South.

In the case before the court, Borello and the workers entered into a sharefarming agreement with a local pickle-maker to provide the firm with small cucumbers. Under the pact, the workers’ responsibilities included weeding, hoeing and picking--and it was up to them to decide when, and at what size, to pick the cucumbers, a crucial choice in the production of pickles.

In August, 1985, the state Division of Labor Standards Enforcement moved against the grower, citing Borello for failing to provide workers compensation coverage and failing to obtain a work permit for a 10-year-old boy who was seen in a field.

Borello, facing a $5,000 fine, contended that it had no such obligation because the workers were not its employees. A state hearing officer rejected the grower’s contention and was upheld by a Santa Clara County Superior Court. But in December, the state Court of Appeal ruled for Borello, finding the workers were not employees but independent contractors.

Control Relinquished

The appeal court, analyzing the division of responsibilities under the agreement, found that the grower had relinquished control of the care and harvest of the crop to the workers.

The court cited other factors it said indicated the workers were private contractors: the sharefarmers could not be fired; they provided their own equipment; they worked for a limited period of time; they were paid by the result of their work, rather than by the hour, and they, like the landowner, regarded themselves as independent contractors.

Later, the state Supreme Court was asked to bar the appellate ruling from being used as precedent in other cases. But the justices instead took the unusual step of ordering full review of the decision on their own motion. The court specifically directed parties in the case to address the question of what affect the appellate ruling, if upheld, could have on all worker-protection legislation in California.

The state, in a brief filed by H. Thomas Cadell Jr., chief counsel for the labor standards enforcement division, said the appeal court ruling could “drastically narrow” the employer-employee relationship.

The decision placed “form over substance” by ignoring the economic realities of the sharefarming arrangement, the state said. For example, despite the tasks assigned to the workers, Borello still maintained effective control of water, pesticides and storage bins for the crops, the state pointed out. The sharefarmers remained economically dependent on the grower, performing substantially the same tasks as ordinary farm workers, and thus must be regarded as employees, it said.

Language Problem

The state argued further that the sharefarmers, many of whom are Spanish-speaking natives of Mexico or Central or South America, might not fully understand the legal protections they would forfeit when they sign on as contractors rather than employees. For instance, they could lose eligibility for unemployment and disability benefits, forcing them to go on welfare when not working, the state argued.

Borello and the grower groups replied in their briefs that the sharefarmers are engaged in a separate and distinct occupation or business and are neither “directed, supervised nor controlled” by the grower.

They said that contrary to the state’s predictions, there will be no “disastrous affects” on protective legislation if the appellate ruling is upheld. The sharefarmers, as independent contractors, will be held accountable for obeying state and federal labor laws and health and safety standards. Similarly, any sharefarmers who themselves hire workers to help with their tasks must obey anti-discrimination laws as would any employer, the growers said.